Exchange Traded Products Flashcards
Exchange Traded Funds (ETFs)
Index tracker funds listed and traded on major stock markets
Legal structure is a company.
Designed to match return on index they track (usually by fully replicating the index)
If full replication not used - known as sampling or optimisation
Some use swaps/synthetic replication
Valued daily
Trades close to NAV
No initial fees and typically lower OF and TER but brokerage fees on trades
No stamp duty on purchases
Income tax on dividend payments
CGT on disposal gains
Eligible for ISA inclusion
Exchange Traded Commodities (ETCs)
Pooled investment listed on LSE
Tracks performance of underlying commodity or basket of commodities or index
Traded and settled like normal shares
Exchange Traded Notes (ETNs)
Traded on stock exchange
Performance tracks movement of index
Type of bond issued by a bank (unsecured)
Additional risk as value affected by credit rating of issuer
Maturity date but don’t pay interest
No portfolio of investments
Use derivatives to track index instead of owning anything
